GovWire

The energy market is different to most other goods and services you buy and is different to the domestic energy market for home use, for example:

• theres usually no cooling off period
• prices are not capped
• separate contracts are required for gas and electricity
• at the end of the contract, if no action is taken, you will move to a higher uncompetitive cost, known as the deemed rate
• energy prices can fluctuate rapidly from day to day

The Get help buying for schools service is available to help and support in scope schools and trusts with their procurement activity.

When buying energy its important that you consider:

• the duration of the energy contract
• fixed, flexible or variable energy costs contracts
• who youre buying from

Reduced rate VAT

Schools with charitable status are usually entitled to issue a certificate to their energy supplier to get fuel and power at a reduced rate of VAT, provided it is used for the non-business provision of education. This removes the climate change levy charge from the energy bills for these schools. If fuel and power is used for business activities, then an apportionment should be made.

For more information, visit:

• VAT Education Manual
• Fuel and power (VAT Notice 701/19)

For specific VAT queries you should contact HMRC or appoint a tax expert.

Emergency contact details

If your annual gas consumption is above 732,550 kwh (25,000 therms) you need to provide emergency 24-hour contact names and phone numbers when completing your contract.

You will not be able to register your site with a new supplier without this contact information.

Choose a pricing option

For gas, only 65% of your bill is made up of gas. The rest is made up of network costs set by Ofgem and other costs fixed by the government.

For electricity 50% of your bill is made up of electricity costs. The rest is made up of network costs set by Ofgem and other costs fixed by the government. These costs are referred to as pass through costs.

Fully fixed prices

Youll get a fixed cost per kWh throughout the length of your contract, including network costs (electricity) or fixed standing charge (gas).

Fixed price contract

Energy is purchased in advance of the contract start date. Youll get a fixed cost per kWh throughout the length of your contract.

In high priced or volatile markets you many want a shorter length contract, for example, no more than 12 months, to allow time to make an informed decision.

With gas, the standing charge is fixed. The standing charge is normally shown as a cost per day.

The electricity network costs may change if Ofgem approves changes. Your provider will notify you of cost changes.

Variable, locked or flexible basket price contract

This pricing option varies according to provider. Consider what each provider offers before you buy.

The price you pay for energy will vary during the length of your contract. This is because your provider purchases energy in blocks before and during the length of your contract. The gas standing charge will normally be a fixed cost per day. Electricity network charges will normally be passed through for these contracts

Fixed pricing

The benefits of fixed pricing are:

• you know the rate before supply starts
• youre protected from increasing prices

The limitations of fixed pricing are:

• you cannot benefit if market prices reduce
• the price is fixed for the duration of the contract

Flexible or variable pricing

A benefit of flexible or variable pricing is that the price could reduce if the energy price reduced. However its harder to budget as the price isnt known in advance and youre not protected from increasing market prices.

There are multiple contract length options.

Level of support

Different framework providers offer different levels of support.

If youre unfamiliar with the energy buying process, you may want to use a provider who offers more guidance. You can also contact our Get help buying for schools service.

Contract length

Typically 1, 2 or 3 year contracts are offered.

Longer term contracts

The benefits of longer term contracts are:

• known contract details
• less workload
• less dates to manage

The limitations are:

• longer term commitment
• larger impact: you need to ensure it remains complaint and you understand the implications
• to not forget to review before the contract ends

Shorter term contracts (typically 3 to 12 months)

Shorter term contracts mean you have more flexibility to change your approach. However youll need to manage renewal dates and quotes more often.

All energy contracts should be recorded in your contract register.

Read the minimum standard questions to help you evaluate your quotes.

Energy can be bought from:

• a DfE approved framework
• local authority agreements, where available
• other suitable compliant frameworks
• brokers also referred to as third party intermediaries (TPI)
• direct from the supplier

Whichever route you select, ensure that it is complaint with procurement regulations and your settings approval process, meets your needs and that you understand the total cost of the contract.

Use a framework

Buying from a framework can be quicker and easier than getting bids or quotes because the agreements:

• have already been through a full competitive tender process
• have been quality checked
• are checked to make sure they comply with the law
• may have support available
• benefit from economies of scale by grouping demand together

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